Long Ideas 25/6/24

Overview of actionable ideas I am owning/looking at

I'm studying for Uni tests but haven’t posted in a while so I thought I’d share some of the actionable ideas I own/am looking at.

My main portfolio positions

STNE 0.00%↑ , BABA 0.00%↑ (my emerging market plays on China and Brazil) are still incredibly cheap here. I have written about them in the past.

BABA 0.00%↑ has close catalysts as:

• Stock-connect (HK primary listing) coming online will increase liquidity in August

• China's macro is improving by the day (retail data, inflation, stimulus, rates)

• US interest rates and USD/CNY have peaked and as the Chinese market turns into a bull market, the mark-to-market on their investment portfolio will recover and with it GAAP earnings.

STNE 0.00%↑ is still on a trajectory to trading at 3-5x normalized earnings in a couple of years. For a business with its growth and churn profile, it is ridiculous. The market is worried about slowing growth (partly accounting changes). I am certainly watching it but I think the shares are extremely mispriced.

CPS 0.00%↑ - I have written about this one. Still incredibly cheap.

• Light vehicle production and sales volumes are exceeding guidance (which will be updated in the next call)

• They will have no problem with the refinance in 25 after 2+ Fed cuts

• Progressing to double-digit EBITDA and ROIC

XBI 0.00%↑ - small-cap biotech ETF. Nothing changed. Interest rates and deals coming back play at low historical quantitative valuations.

PYPL 0.00%↑ is a smaller position for me. They are still growing, valued cheaply, and doing buybacks. New features look nice but the impact remains to be seen.

Delverage and Destock Situations

All will benefit from the incoming 2 Fed cuts as risk assets and leveraged companies will see flows returning as refinancing the debt at lower rates will become easier.

• NBR 0.00%↑ - I picked some again on weakness. A lot of capex was pulled forward and will be accrettive to earnings in the coming years. Debt

  maturities are far enough and they are focused on deleveraging.

  The enterprise is trading incredibly cheap on future cashflow and as it is highly leveraged, the equity upside is leveraged as well.

• WBD 0.00%↑ - didn’t do a lot of research here but looks cheap. Most of the debt is fixed and long-term. Huge cash flow, a lot of IP, and management looks focused if controversial.

• CNDT 0.00%↑ - Continuing to execute on the divestiture plan. They are selling assets at ~7x+ adj ebitda and repaying debt/buying back shares while they are trading at forward 3-5x adj ebitda. Looks incredibly cheap.

  I need to do more work on the businesses they are focusing on.

• $LEAT - as they slowly convert inventory/receivables to cash and consumer discretionary demand returns post-cut, this looks cheap. didn’t dive deep yet. Could take another quarter or two for the distribution partners’ inventory to normalize.

• CRK 0.00%↑ - Leveraged natural gas play. Enterprise is undervalued relative to pv-10 assuming natural gas prices keep appreciating/stabilizing which is reasonable as the demand on the power grid from AI/cloud/natural disasters/… grows.

• SWK 0.00%↑ - I have written about them in the past. Strong brands. Are cutting costs, destocking, and deleveraging. Positive cashflows and are incredibly cheap on forward multiple of earnings.

• $ASOS - I have written about them in the past.

  • The UK is starting to recover.

  • They have operating leverage and are close to turning profitable.

  • Powerful insiders have interest in the company succeeding.

  • Have turned down a buyout offer at 3x the current price.

Random situations that look interesting

• $tse:drx - the market puked here. This looks interesting at the current valuation

• SOLV 0.00%↑ - same. Looks cheap here. Regular spinoff puking tends to work out well.

• $cve:pha looks enticing at the current valuation.

• $dur.ax looks interesting as well, although too stable for me. Is trading at a lower valuation than peers with predictable earnings Multiple should be realized as they grow to a more visible market cap.
  Sohra Peak Capital @JonCukierwar has a great writeup on it.

• $mob.st is a crazy rabbit hole I recommend going down. Look at

  Left
  or at twitter @LeftField_FHRS. I have a sizable position.

• ACHV 0.00%↑ is an interesting assymetric play

  Jacob Rowe
  found. Recommend reading his writeup.

• $IVFH I own this at lower prices (thanks

  Sebastian
  ) it still has a lot of growth runway and they have started to solve the main risk (customer concentration). Holding this for the long term as long as the management keeps executing.

• SBSW 0.00%↑ The elections in South Africa were an overhang on the stock as there were worries the ruling party would need to form a coalition with the business-hostile NFP.

  These worries didn’t materialize as they formed the coalition with the much more rational Democratic party. As PGM prices normalize, and the government stabilizes, this could rerate just as the commodity cycle turn

  This is a miner so they might find a way to lose money anyway, but a lot is priced in.

  calvinfroedge
  has written about it.

Macro Summary

Nothing really changed. Auto insurance and Shelter inflation (OER) took longer to break than I expected. Still, the Fed is highly likely to cut 2 times this year starting in September.

War in the Middle East is brewing. I have no idea how to account for that in my macro view. As long as trade routes remain free, it shouldn’t change much hopefully (investing-wise).

Comment/Like whether you find value in posts like this or prefer that I do deeper dives when I have the time.

Disclaimer: I am long some of these positions. This is opinion, not financial Advice!